Discussion
of Issues
Issue 1:
Should the Commission approve FPUC's request to
establish an AFUDC rate of 5.70 percent?
Recommendation:
Yes. The appropriate AFUDC rate for FPUC is 5.70
percent based on a 13-month average capital structure for the period ended
March 31, 2023. (McGowan)
Staff Analysis:
FPUC filed a petition requesting approval of an
AFUDC rate of 5.70 percent. Rule 25-7.0141(3), F.A.C., Allowance for Funds Used
During Construction, provides the following guidance:
(3) The applicable AFUDC rate
will be determined as follows:
(a) The most recent 13-month average embedded cost of
capital, except as noted below, will be derived using all sources of capital
and adjusted using adjustments consistent with those used by the Commission in
the utility’s last rate case.
(b) The cost rates for the components in the capital
structure will be the midpoint of the last allowed return on common equity, the
most recent 13-month average cost of short-term debt and customer deposits, and
a zero cost rate for deferred taxes and all investment tax credits. The cost of
long-term debt and preferred stock will be based on end of period cost. The
annual percentage rate must be calculated to two decimal places.
In support of its requested AFUDC rate of 5.70 percent,
FPUC provided its calculations and capital structure in Schedules A and B
attached to its request. Staff reviewed the schedules and determined that the
proposed rate was calculated in accordance with Rule 25-7.0141(3), F.A.C. In
Schedule A, the Company appropriately used the mid-point return on equity of
10.25 percent, which was approved by Order No. PSC-2023-0103-FOF-GU.
The AFUDC rate calculation and capital structure are presented in Attachment 1.
Based on its review, staff believes that the requested
AFUDC rate of 5.70 percent is appropriate and should be approved.
Issue 2:
What is the appropriate monthly compounding rate to
achieve FPUC's requested annual AFUDC of 5.70 percent?
Recommendation:
The appropriate monthly compounding rate to achieve
an annual AFUDC rate of 5.70 percent is 0.004630. (McGowan)
Staff Analysis:
FPUC requested a monthly compounding rate of
0.004630 to achieve an annual AFUDC rate of 5.70 percent. In support of the
requested monthly compounding rate of 0.004630, the Company provided its
calculations in Schedule C attached with its request. Rule 25-7.0141(4)(a),
F.A.C., provides the following formula for discounting the annual AFUDC rate to
reflect monthly compounding.
M = [((1 + A/100)1/12)-1] x 100
Where: M = discounted monthly
AFUDC rate
A = annual AFUDC rate
The rule also requires that the monthly compounding rate
be calculated to six decimal places.
Staff reviewed the Company’s calculation and determined it
was derived in accordance with Rule 25-7.0141(4), F.A.C., as presented in
Attachment 2. Therefore, staff recommends that a monthly compounding AFUDC rate
of 0.004630 be approved.
Issue 3:
Should the Commission approve FPUC's requested
effective date of April 1, 2023, for implementing the AFUDC rate?
Recommendation:
Yes. The AFUDC rate should be effective April 1,
2023, for all purposes. (McGowan)
Staff Analysis:
FPUC’s requested AFUDC rate was calculated using the
most recent 13-month average capital structure for the period ended March 31,
2023. Rule 25-7.0141(6), F.A.C., provides that:
No utility may charge or change its AFUDC rate without
prior Commission approval. The new AFUDC rate will be effective the month
following the end of the 12-month period used to establish that rate and may
not be retroactively applied to a previous fiscal year unless authorized by the
Commission.
The Company’s requested effective date of April 1, 2023,
complies with the requirement that the effective date does not precede the
period used to calculate the rate, and therefore, should be approved.
Issue 4:
Should this docket be closed?
Recommendation:
If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, this docket should be
closed upon the issuance of a consummating order. (Brownless)
Staff Analysis:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order.
